Correlation Between Carnival and Connecticut Light
Can any of the company-specific risk be diversified away by investing in both Carnival and Connecticut Light at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Carnival and Connecticut Light into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carnival and The Connecticut Light, you can compare the effects of market volatilities on Carnival and Connecticut Light and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Carnival with a short position of Connecticut Light. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carnival and Connecticut Light.
Diversification Opportunities for Carnival and Connecticut Light
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Carnival and Connecticut is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Carnival and The Connecticut Light in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Connecticut Light and Carnival is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Carnival are associated (or correlated) with Connecticut Light. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Connecticut Light has no effect on the direction of Carnival i.e., Carnival and Connecticut Light go up and down completely randomly.
Pair Corralation between Carnival and Connecticut Light
Considering the 90-day investment horizon Carnival is expected to generate 1.19 times more return on investment than Connecticut Light. However, Carnival is 1.19 times more volatile than The Connecticut Light. It trades about 0.24 of its potential returns per unit of risk. The Connecticut Light is currently generating about 0.02 per unit of risk. If you would invest 1,634 in Carnival on November 2, 2024 and sell it today you would earn a total of 1,215 from holding Carnival or generate 74.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.06% |
| Values | Daily Returns |
Carnival vs. The Connecticut Light
Performance |
| Timeline |
| Carnival |
| Connecticut Light |
Carnival and Connecticut Light Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carnival and Connecticut Light
The main advantage of trading using opposite Carnival and Connecticut Light positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carnival position performs unexpectedly, Connecticut Light can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Connecticut Light will offset losses from the drop in Connecticut Light's long position.| Carnival vs. Royal Caribbean Cruises | Carnival vs. Airbnb Inc | Carnival vs. Expedia Group | Carnival vs. Booking Holdings |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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